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Comments of Commissioner Rebecca Dye at NCBFAA Government Affairs Conference

September 24, 2007

Thank you for inviting me to your Association's Government Affairs Conference. I enjoyed speaking to you in Orlando a few years ago, and I was very pleased when Ed Greenburg asked me to be here today.

I was honored that President Bush re-nominated me and the Senate subsequently confirmed me to a second term as Federal Maritime Commissioner. During the last nearly five years, I have enjoyed working with the dedicated Commission staff.

I recently read the book on the New York Times best seller list entitled Good to Great by Jim Collins. He concludes that the way good managers guide companies to become exceptionally successful is simply by getting the very best people to join them. It may sound obvious, but it is surprising to see how often this simple key to success is overlooked.

One of the best people we have at the Federal Maritime Commission is Secretary Bryant VanBrakle. I was pleased that your organization honored him today, for his over 40 years of dedicated public service. Bryant has been of enormous assistance to me since I came to the Commission. We will miss his sound advice and professionalism in serving the Commission and the public.

Ed Lee, who is here today, is also one of the best people we have at the Commission. I was grateful that Ed agreed to accompany me from Capitol Hill to the Commission to act as my counsel.

Also here today is Commission General Counsel Amy Larson, who is among the best attorneys I have worked with during my career. Amy is not only an exceptional attorney, but a strong advocate for reform as well.

Ocean transportation intermediaries are critical players in determining American success in international trade. Your companies are working with U.S. importers and exporters to develop complete logistics operations which allow American companies to thrive in a fiercely competitive world market.

As many of you know, I had the privilege of serving as the Counsel to the House Transportation and Infrastructure Committee's Coast Guard and Maritime Transportation Subcommittee during the development of the almost ten year old Ocean Shipping Reform Act.

As everyone here knows, the Reform Act allows ocean common carriers to enter into a service contract with one or more shippers. The Reform Act permits these contracts to be filed confidentially with the Commission.

As passed by Congress, the Reform Act did not grant non-vessel operating common carriers the right to offer service contracts in their capacity as carriers with their shipper customers. After a number of petitions were filed at the Commission, including one from your organization, the Commission issued regulations which exempt NVOCCs offering NVOCC Service Arrangements from the tariff publication requirements of the Shipping Act.

As of the end of July, the Commission has received approximately 1,322 NVOCC Service Arrangements filed by 92 NVOCCs. I would encourage all NVOCCs to take advantage of this new contracting option.

The NSA regulations did not allow NSAs to be jointly offered by unaffiliated NVOCCs. The Commission issued a Notice of Inquiry in 2005 asking for public comment on this question. While the Commission has yet to take action on this issue, I believe that these arrangements would qualify as joint ventures under the Justice Department's guidelines. I would strongly support allowing unaffiliated NVOCC's to offer joint NVOCC Service Arrangements filed at the Commission.

As you know, there is currently a petition before the Commission seeking verification that ocean transportation intermediaries licensed by the Commission are permitted to utilize agents to perform some services on their behalf without a separate license.

I know that your group has submitted comments in this proceeding supporting the position that NVOCCs are permitted to use agents in this manner. I support this position.

Our current regulations and common law agency principles ensure that the shipping public is protected by requiring that any NVOCC licensed by the Commission is responsible for the actions of its agent.

I do not believe that our regulations should be applied in such a way that unduly interferes with your business activities. In fact, when the Commission issued the regulations to implement the Reform Act's requirements applicable to NVOCCs, it stated that it did not want to interfere with business innovations and changes in the industry. I support an approach that imposes minimal burdens on the industry while protecting the public interest.

On a related note, I know you are concerned about recent actions by the Chinese Government that have created uncertainly in your operations in China. As I understand it, Chinese regulations on branch offices could be interpreted to include any location from which a bill of lading is issued, even if that service is performed by an agent.

The result would be that each agent would be required to obtain a license and deposit the required funds for each location deemed a "branch office."

With advice from your group, the FMC staff worked with the U.S. State Department and the Maritime Administration, and the State Department has sent an official cable expressing our concerns to the U.S. Embassy in Beijing. We are hopeful that diplomatic efforts will resolve this issue so that your activities in this major trade are not impeded.

I know that many of you are interested in how the European Commission's decision to repeal the exemption from the European Commission Treaty's ban on restrictive business practices for liner conferences on routes to and from the European Union will affect carrier antitrust immunity in the United States. I do not think the U.S. needs to change its regulatory system in response to this European action.

The Reform Act balanced carrier antitrust immunity with confidential contracting in 1998. Following this action, conferences, once the dominant pricing forum, have lost much of their influence. Last year, price-fixing agreements declined to less than one percent of agreements filed at the Commission.

The Commission continues to regulate the use of antitrust immunity in the U.S. international trade. The Commission analyzes what impact a carrier or terminal agreement will have on competition, in particular, whether it is likely that the agreement will result in an unreasonable increase in transportation cost or decrease in service.

As the end of European antitrust immunity nears, the FMC staff plans to assess what competitive impacts the change will have on the U.S.-E.U. liner trades.

The Commission staff also plans to undertake an analysis of the utilization of antitrust immunity by vessel operators to enable the Commission to develop policies and revise regulations, if necessary, to better reflect market conditions and activities.

As you may know, our Bureau of Certification and Licensing has developed an automated FMC-18 which is the application for an ocean transportation intermediary license. OTIs applying for a license can now file a license application electronically, on a voluntary basis, for a greatly reduced user fee. I urge new licensees to use this system which will reduce the wait for a license and greatly lower the cost of obtaining a license.

Finally, I know that your organization is very interested in an exemption from the requirement that non-vessel operating common carriers publish tariff rates on their shipments not covered by a NVOCC Service Agreement. Like you, I believe the practical usefulness of tariffs may be ending. Almost 90 percent of freight carried to and from the United States is currently under contract.

I think it is time that we begin a discussion on tariff reform. I also think we should consider tariff publishing relief for vessel operating carriers. I am not prepared to endorse any particular approach today, but I believe that the time has come to consider tariff reform.

The economist Thomas Sowell writes often in his newspaper column about the unintended consequences of certain governmental actions. I think that the best way to avoid unintended consequences is to listen to the advice of people on all sides of an issue.

The success of the 1998 Reform Act is due in large part to the active involvement of everyone in our industry including your organization. As we move forward, I hope to work with you to ensure that we have an efficient and secure ocean shipping system to complement our dynamic American economy.